Research Reveals Investor Inflation Concerns
Most investors with individual savings accounts (ISAs) are concerned about the short-term impact of inflation on their portfolios, according to research from online investing platform Freetrade.
ISAs comprise a suite of government-backed savings plans which, depending on the product chosen, allow interest or investment growth to accumulate tax-free
In a poll of 1,000 ISA holders, commissioned by the company in association with the Investing Reviews website, two-thirds (67%) said they were worried about the effect of inflation on their investment gains over the next three years.
Freetrade found the typical investor expects to make returns of 5.8% per annum over that period. But with the consumer prices measure of UK inflation recently soaring to a 30-year high of 6.2%, the majority of investors expect to find it harder to make real gains in the foreseeable future.
Despite rising interest rates and increased stock market volatility because of the conflict in Ukraine, Freetrade said a significant proportion of investors – one-in-five (19%) – still expect to make double-digit gains in the immediate years ahead.
In another finding, less than a third (31%) of investors believe that a strategy of holding single company stocks promised the best future returns. In contrast, nearly half (49%) thought low-cost funds were likely to offer the strongest performance.
The poll also revealed more optimism about the potential of UK equities, following record outflows of £5.3 billion from the sector during 2021. One-in-five investors intend to increase their exposure to domestic assets, while 4% are inclined to sell off their UK holdings.
Freetrade’s Dan Lane said: “Maybe the UK market’s relatively cheap valuation is proving too hard to resist, or maybe the allure of US tech is waning slightly. Whatever the reason, the UK seems to be back on the menu in 2022.”
* For savers and investors who haven’t already done so, time is running out to use this tax year’s ISA allowance. All UK adults have an ISA allowance each tax year worth £20,000. The 2021-22 tax year ends on 5 April and the 2022-23 equivalent begins the following day.
